The Nigerian National Petroleum Company Limited (NNPCL) reported a complete absence of funds remitted to the Federation Account in 2022.
This shortfall was attributed to the subsidy payments made on Premium Motor Spirit, commonly known as petrol, as explained by the Chief Financial Officer, Umar Ajiya.
As a pivotal revenue-generating entity in Nigeria, NNPCL serves as the national oil company overseeing the management and sales of the country’s crude oil and gas, among other crucial functions.
Ajiya, in a 5.24-minute video released by the oil major, outlined that the subsidy on fuel hindered the company from remitting taxes and royalties to the Federation Account, ultimately impeding its ability to generate profit.
In the documentary, NNPCL highlighted how the persistent challenge of fuel subsidy payments restrained its growth potential. However, a positive turn occurred with the arrival of a new administration, signaling the end of the subsidy regime and rescuing the company from potential bankruptcy, steering it toward financial prosperity.
The documentary, “So This Happened (198),” also sheds light on the impact of these changes. It noted that the removal of the subsidy allowed NNPCL to substantially increase its profits from N674.1 billion in 2021 to N2.54 trillion by the third quarter of 2022.
The pivotal moment came when President Bola Tinubu officially declared the end of the subsidy during his inaugural speech on May 29, 2023. The swift enforcement of this declaration by NNPCL the next day marked a significant shift. As Nigeria’s sole importer of Premium Motor Spirit, the company played a crucial role in implementing the subsidy removal.
In response to this development, Ajiya expressed the profound impact, stating that the removal of the subsidy saved the nation approximately N400 billion monthly. This action meant that the entirety of tax, royalties, and profits were no longer directed towards the subsidy, contributing to a more sustainable financial landscape.
“And that was why we reached a position in 2022 where we literally remitted zero to the Federation Account. It was unpalatable, but we can’t give what we don’t have.
“We were taking NNPC’s cash flows from other operations to augment for products and it could not be sustained beyond June 2023.”
Fuel subsidy gulped over N3.3tn in 2022, as the Federal Government struggled to hold the cost of the product far below its global market price. The cost of the commodity jumped by over 250 percent immediately subsidy was removed by Tinubu.
Ajiya confirmed that the removal of subsidy had made the company start making remittances into the Federation Account.
“We have now begun to pay dividends to the federation. We are also paying our due obligations in terms of taxes and royalties,” he stated.
The company further stated in the documentary that the end to subsidy enabled it to contribute N4.5tn to the Federation Account in nine months.
“For the first time in a long time, NNPC Ltd in 2023 contributed to the Federation Account, accounting for N4.5tn between January and September 2023,” the national oil company stated.
